U.S. v. Sabbagh, Civil Action No. 97-CCB-926.
| Decision Date | 08 May 2000 |
| Docket Number | Civil Action No. 97-CCB-926.,Civil Action No. 97-CCB-927. |
| Citation | 98 F.Supp.2d 680 |
| Parties | UNITED STATES v. Zeki A. SABBAGH and Jack Sabbagh, Petitioners. |
| Court | U.S. District Court — District of Maryland |
Fred Warren Bennett, Greenbelt, MD, for Petitioners.
Lynne A. Battaglia, United States Attorney, Stephen S. Zimmerman, Assistant U.S. Attorney, Greenbelt, MD, for Respondent USA.
On March 26, 1992, petitioners Zeki Sabbagh and Jack Sabbagh, father and son, were convicted by a federal jury of conspiracy to distribute one kilogram or more of heroin, and conspiracy to violate the money laundering laws of the United States. In addition, Zeki Sabbagh was convicted of being part of a second heroin distribution conspiracy and six substantive counts of money laundering.1 Sentence was imposed on September 9, 1993. Now pending are the Sabbaghs' motions under 28 U.S.C. § 2255 to vacate and set aside their convictions and sentences and remand for a new trial. The Sabbaghs request an evidentiary hearing, arguing that counsel labored under multiple, actual conflicts of interest which adversely affected the representation received by the Sabbaghs at trial, thus constituting ineffective assistance of counsel under the Sixth Amendment as interpreted by the Supreme Court in Cuyler v. Sullivan, 446 U.S. 335, 100 S.Ct. 1708, 64 L.Ed.2d 333 (1980). They also argue that their Fifth Amendment Due Process rights were violated at sentencing because the trial judge failed to advise them of their right to appeal their sentences. For the reasons that follow, their motions will be denied.
Zeki A. Sabbagh, along with his two sons, Jack and Ayash Sabbagh, operated Saba Distributing, Inc. ("Saba Distributing") in New York City. Saba Distributing was a legitimate cosmetics exporting business with millions of dollars in annual sales. However, several Nigerian heroin dealers used Saba Distributing to launder substantial drug proceeds by purchasing cosmetics for export to Nigeria. These dealers were indicted during 1989-91. Zeki Sabbagh was indicted May 2, 1991 and Jack Sabbagh was indicted December 5, 1991.
At trial, which lasted 31 days, a number of dealers testified that they enlisted the help of the Sabbaghs to launder their drug proceeds. The primary method of money laundering was the sale of cosmetics for cash generated from heroin sales and the shipment of the cosmetics to Nigeria, where they were sold. Dealers also testified that they kept several hundred thousand dollars obtained from drug sales on account with the Sabbaghs, which was used either to purchase cosmetics or to pay couriers. There was testimony that Zeki Sabbagh packed $1 million in $100 bills in a cosmetics box; that on another occasion he packed cash in a detergent box; and that for a small fee, the Sabbaghs would exchange small bills for $100 bills which were safer and easier to hide and transport out of the country. One dealer testified that he had separate conversations with both Zeki and Jack Sabbagh in which he described his own drug trafficking activities as well as the roles of others, and that the Sabbaghs not only continued doing business with him after hearing this, but on one occasion Zeki Sabbagh informed him that another customer was looking for a buyer for his freshly imported heroin. Another testified that Zeki Sabbagh told him that in January of 1990, U.S. Customs agents had personally informed Zeki Sabbagh that some of his Nigerian customers were heroin traffickers. The jury also heard a one-hour taped conversation between Zeki Sabbagh and an undercover law enforcement agent, as well as the agent's live testimony. Senior Judge Herbert Maletz, who presided at trial, described this and other evidence at length in a published opinion in which he denied the Sabbaghs' motion for a new trial. United States v. Sabbagh, 888 F.Supp. 714, 715-19 (D.Md.1993), aff'd 27 F.3d 564 (4th Cir.1994) (table).2
Zeki Sabbagh did not testify at trial, but Jack Sabbagh testified in his own defense that while he and his father had long been aware that Nigerian heroin traffickers had infiltrated the cosmetics industry, there was nothing about any of his Nigerian customers to arouse their suspicions. He also admitted that he and his father exchanged small denomination currency into $100 bills for clients and friends of clients. He was unable to explain, however, why supposedly legitimate businessmen would pay for such a service rather than having a bank do it at no charge. Jack Sabbagh also admitted that he and his father falsified bills of lading so as to omit cars, furniture and other items that were loaded onto their clients' cosmetics shipping containers. He testified that he did not believe there was "'anything tremendously illegal'" about this practice. Id. at 718. The Sabbaghs' defense was based entirely on their lack of knowledge that the large amounts of cash they received from the heroin dealers represented drug proceeds. (Brief at 4.) Part of the government's otherwise substantial evidence of the Sabbaghs' knowledge consisted of the failure of Saba Distributing to file an Internal Revenue Service form 8300 every time it conducted a transaction in which $10,000 or more in cash was received, as required by the Internal Revenue Code, 26 U.S.C. § 6050I.3 Additionally, one dealer testified that it was understood that the Sabbaghs would not file form 8300. Sabbagh, 888 F.Supp. at 716. The government also introduced evidence that a number of blank and partially completed form 8300s were discovered in Saba Distributing files. The Sabbaghs did not dispute that they failed to comply with the I.R.S. Form 8300 requirements. They argued rather that such failure was explained by their reliance on erroneous advice from one of their corporate attorneys, Abraham Badway, who was referred the question by their other corporate attorney, George Xylas, and thus should not be viewed by the jury as evidence of their knowledge of the source of the drug proceeds.
The Sabbaghs' respective trial counsel's presentation of their defense on the form 8300 issue is the subject of this motion. They claim that attorneys Richard M. Egbert, who represented Zeki Sabbagh, and Richard Landes, who represented Jack Sabbagh, failed to call as witnesses Xylas, Badway, and Ayash Sabbagh, on account of Egbert's and Landes's multiple conflicts of interest; they also allege that Xylas managed Zeki Sabbagh's defense from behind the scenes. These alleged conflicts and their deleterious effects on the Sabbaghs' representation form the basis of their ineffective assistance of counsel claims. The events surrounding their failure to file the forms must therefore be recounted in some detail.
In February 1990, well over a year before Zeki and Jack Sabbagh were indicted, U.S. Customs agents, in the course of an investigation of stolen cars, confronted Jack and Ayash Sabbagh at their Brooklyn office. According to Jack Sabbagh's testimony at trial, Jack and Ayash Sabbagh readily admitted to Customs that Saba Distributing was conducting cash transactions involving $10,000 or more. The customs agents informed them that they believed some form should have been filled out for these transactions, but were not sure about which form was required. They advised Saba Distributing to consult with their attorneys or accountants.
Ayash Sabbagh contacted Saba's attorney, George M. Xylas, by faxing a copy of a Cash Transaction Report form ("CTR"), a customs document, which Jack Sabbagh had obtained from a bank. Xylas had no idea what the form was, and referred the question to attorney Abraham Badway. Badway located form 8300 but was not sure if it was the correct form. He faxed the front side of an 8300 to Saba Distributing, but did not fax the back of the form which contained instructions on filling out the front side. Instead, Badway instructed Saba Distributing by way of a telephone call to Jack Sabbagh that Saba Distributing should have its customers sign the bottom of the form and that Saba Distributing should maintain the forms on file.4 Form 8300, however, is required to be filed with the I.R.S. within 15 days of any cash transaction (or multiple related transactions) totaling $10,000 or more. 26 C.F.R. § 1.6050I-1(e) (1990); 51 Fed.Reg. 31610, 31613 (1986) (announcing final regulation). Moreover, it is to be signed by the business receiving the cash, and not by the customer delivering it. Saba Distributing maintained the forms as instructed, although it did not treat the task as a "top priority," sometimes forgetting to complete the form at all. (Tr. at 4255.) It is undisputed that Badway's advice concerning the 8300 forms was miserably wrong. (Brief at 9-11; Opp. at 4-5.)
When Zeki Sabbagh was arrested on May 2, 1991, he asked Xylas to be his defense counsel. Xylas then asked Badway to be Zeki Sabbagh's lead counsel. Xylas and Badway entered appearances at Zeki Sabbagh's initial arraignment on May 17, 1991, with Badway limiting his own appearance to "arraignment only." (Papers 24, 25.) Badway spoke on Zeki Sabbagh's behalf at the arraignment, and later contacted attorney Richard M. Egbert, initially with the notion that he and Egbert could act as Zeki Sabbagh's co-counsel. Egbert, however, rejected this proposal because of the conflict of interest arising from Badway's erroneous legal advice to Saba Distributing regarding the 8300 forms. (Brief at 12.) Egbert entered his appearance and thereafter represented Zeki Sabbagh through the end of trial. Neither Xylas nor Badway ever again appeared in court on Zeki Sabbagh's behalf. The Sabbaghs claim, however, that Xylas continued to direct Zeki Sabbagh's defense "behind the scenes in a consultive role and as a facilitator." (Id.)
Additionally, during the pendency of this proceeding, Xylas allegedly acted...
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